The S&P 500 Index has been on a rally this month. This is especially true as the benchmark is on track to post the best month in 34 years, having gained 7.2% with just a day remaining in August. The large-cap index hit the 3,500 milestone for the first time in history and rallied for seven consecutive sessions.

Most of the rally was driven by a solid rebound in technology stocks lately, progress in the race to develop treatments and vaccines for COVID-19, and the prospects of super-low interest rates for a prolonged period. In particular, the Federal Reserve unveiled an aggressive new policy that would keep rates lower for longer and tolerate higher inflation levels while supporting the labor market as much as possible (read: Bank ETFs to Explode Higher on New Fed Policy).

Additionally, the Food and Drug Administration approved the use of convalescent plasma from recovered COVID-19 patients as a treatment for serious coronavirus cases. Meanwhile, the Trump administration is seeking emergency use authorization of an experimental vaccine being developed by AstraZeneca AZN and Oxford University ahead of the Nov 3 presidential election.

Further, better-than-expected earnings releases and rounds of economic data, which indicate that the American economy is recovering, added to the strength. The rise in mergers and acquisitions as well as the recent weakness in dollar led to a spike in the S&P 500 Index. Apart from these, the optimism over the U.S.-China trade deal added to the strength. Per a statement released by the U.S. Trade Representative, both the United States and China are in discussion for the implementation of the historic Phase One Agreement and are committed to take the steps necessary to ensure its success.

The bullish trend seems to be continuing this year with many analysts seeing more gains ahead. Goldman predicts that the S&P 500 will hit 3,600 if markets price in a “comparatively more optimistic US GDP forecast.” According to Anthony Denier, CEO of trading platform Webull, the S&P 500 could balloon 11% to 3,900 from the current level before the end of the 2020 if President Trump’s revolutionary vaccine plan is realized before the November election.

Against such a bullish backdrop, investors seeking to participate in the S&P 500 Index’s rally could consider ETFs that replicate the index. While these funds look similar in terms of the holdings breakdown, with Apple AAPL and Microsoft MSFT taking the top two spots and having a Zacks ETF Rank #2 (Buy), there are few key differences between them. We have highlighted the differences below:

SPDR S&P 500 ETF Trust SPY

Launched in January 1993, SPY is the ultra-popular and the oldest U.S. equity ETF with AUM of $308.3 billion. It is the most actively traded fund with average daily volume of around 56.9 billion and 0.09% in expense ratio. The fund is structured as a Unit Investment Trust (UIT) with State Street serving as the trustee. It is therefore not allowed to reinvest dividends paid by underlying holdings but must hold them in cash until they are scheduled to be distributed to SPY shareholders. Additionally, SPY does not lend out securities from its portfolio to earn extra money.

iShares Core S&P 500 ETF IVV

With AUM of $220.9 billion, IVV is a lot smaller than SPY and less liquid, trading in average daily volume of 3 million. This ensures some additional cost in the form of a marginal bid/ask spread. The fund is the low-cost choice in the space, charging just 3 bps in annual fees, 6 bps less than the State Street product. Additionally, the product can lend out shares to earn extra and reinvests dividends in the index until paid out quarterly (read: S&P 500 Hits New Record Highs: Top-Ranked ETF Winners).

Vanguard S&P 500 ETF VOO

Though it has a similar structure and expense ratio as that of the iShares product, average daily volume is relatively similar at 3.1 million shares. VOO has amassed $165.8 billion in its asset base.

Leveraged Play: A Short-Term Win

Investors willing to take extra risk could go for leveraged ETFs that track the index. These funds create a leveraged (1.25x, 2x or 3x) long position in the underlying index through the use of swaps, options, future contracts and other financial instruments. While these funds provide outsized returns in a short span, they could lead to huge losses compared to traditional funds in fluctuating or seesaw markets (see: all the Leveraged Equity ETFs here).

PortfolioPlus S&P 500 ETF PPLC

This ETF offers 1.25X exposure to the index and is the cheapest choice in the large-cap leveraged space, charging just 32 bps in annual fees. It has accumulated $26.9 million in its asset base while trades in a moderate volume of 3,000 shares a day on average. PPLC is up 10.2% in a month.

ProShares Ultra S&P500 ETF SSO

This is the most popular and liquid ETF in the leveraged space with AUM of $3.1 billion and average daily volume of around 2.9 million shares. The fund seeks to deliver 2X the return of the index, charging investors 0.90% in expense ratio. It has gained 15.1% in a month (read: ETFs to Win on S&P’s Upside Potential on Way to Record Close).

Direxion Daily S&P 500 Bull 2x Shares SPUU

While this product also provides 2X exposure to the index, it charges a lower fee of 60 bps. It has a lower level of $20 million in AUM and sees lower volume of about 20,000 shares a day on average. SPUU has returned 15.4% in a month.

ProShares UltraPro S&P500 ETF UPRO

This fund provides 3X exposure to the index with a higher expense ratio of 0.92%. Average trading volume is solid, exchanging more than 6.4 million shares per day on average. It has amassed $1.7 billion in its asset base and soared 23.4% in a month.

Direxion Daily S&P 500 Bull 3x Shares SPXL

Like UPRO, this fund also creates 3X long position in the S&P 500 Index with 0.95% in expense ratio. It is less popular with AUM of $1.5 billion and liquid with average daily volume of nearly 10.2 million shares. SPXL has gained 10.2% in a month.

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